A model of R&D capitalization

Gamal Atallah and Massoud Khazabi ()

MPRA Paper from University Library of Munich, Germany

Abstract: This paper studies the decision of firms to expense or capitalize R&D expenditures. The firm has an incentive to mismatch the benefits and costs of R&D, expensing a larger portion of R&D when the benefits occur in the long-run and capitalizing a larger portion when the benefits occur in the short-run. There is strategic substitutability between R&D investments and expensing. Accounting standards, market evaluation of capitalization, and firms’ accounting policies can have real effects on innovation.

Keywords: Innovation; Expensing; Capitalization; Accounting standards (search for similar items in EconPapers)
JEL-codes: L21 M41 O32 (search for similar items in EconPapers)
Date: 2004-01-18
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Published in International Journal of Business and Economics No. 2.Vol. 4(2005): pp. 107-121

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Related works:
Journal Article: A Model of R&D Capitalization (2005)
Working Paper: A Model of R&D Capitalization (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:39459

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